Joachim Andersen

Accelerated Learning

Scarcity: How Limited Resources Shape Every Choice You Make

Scarcity illustrated by a woman with silver-streaked dark hair in an emerald silk dress and gold cuffs gazing at the last gold ring on a black velvet display beside a golden hourglass running out in a dark Florentine jewelry boutique at night, while a young jeweler in a black turtleneck and white gloves holds an empty velvet tray.
Scarcity illustrated by the last ring and a running hourglass: what is rare and running out suddenly feels far more valuable.


Scarcity is the basic fact that there is never enough of everything for everyone: time, money, attention, land, energy and talent are all limited, while our wants are not. It’s one of the mental models I find most fundamental, because almost every decision I make is really a choice about how to use something scarce, and because scarcity also shapes how I think and how others try to influence me.

The essence of Scarcity is to ask: “What is truly limited here, what am I giving up by using it this way, and is this scarcity real or manufactured?“


Origin: Malthus, Robbins and the Scarcity Mindset

In An Essay on the Principle of Population (1798), Thomas Malthus argued that population tends to grow faster than food supply, so scarcity would keep most people near subsistence. Technology and trade proved him wrong for much of the world, but he put scarcity at the center of economics.

In 1932, the British economist Lionel Robbins gave economics its most famous definition in An Essay on the Nature and Significance of Economic Science: “Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.“

More recently, the economist Sendhil Mullainathan and the psychologist Eldar Shafir showed in Scarcity: Why Having Too Little Means So Much (2013) that scarcity also changes how we think. When we lack money, time or even food, we focus intensely on the immediate problem, which they call tunneling, and the constant worry taxes our mental bandwidth, leaving less capacity for everything else.


Key Concepts

  • Scarcity vs. Shortage
    Scarcity is permanent: resources are always limited relative to our wants. A shortage is a temporary situation where people want more of something than is available at the current price, often because prices are held down or supply is disrupted.

  • Opportunity Cost and Trade-offs
    Because resources are scarce, every choice means giving something up. The real cost of an hour spent on one thing is the best alternative I could have done with it. This is also the core of Comparative Advantage.

  • Price as a Signal
    In a market, prices tell people how scarce something is. When a good becomes scarcer, its price rises, which encourages people to use less of it and producers to make more. In 1945, the economist Friedrich Hayek described this in “The Use of Knowledge in Society” as a system for communicating information that no single person has.

  • The Scarcity Principle in Persuasion
    In Influence (1984), the psychologist Robert Cialdini described scarcity as one of the key principles of persuasion: we value things more when they seem rare or about to disappear. In a 1975 study by Stephen Worchel, Jerry Lee and Akanbi Adewole, people rated identical chocolate chip cookies as more desirable when they came from a jar with 2 cookies than from a jar with 10, and even more so when the jar had just gone from 10 to 2 because of high demand.

  • Artificial Scarcity
    Sometimes scarcity is created on purpose, by limiting supply, using “limited time only” offers or controlling distribution, to raise prices or desire. For much of the 20th century, the De Beers cartel controlled a large share of the world’s rough diamond supply and carefully managed how many diamonds reached the market.


Some Examples

  • The Diamond-water Paradox
    In The Wealth of Nations (1776), Adam Smith noted that water is essential to life yet almost free, while diamonds are nearly useless yet very expensive. The answer, developed by the marginalist economists in the 1870s, is that price depends on the value of one more unit, and because water is abundant, one more glass is worth little, while diamonds are scarce.

  • Limited Editions and Luxury Brands
    Luxury brands, sneaker “drops” and limited-edition watches use scarcity to create desire and status: part of what people pay for is that not everyone can have it.

  • Time and Attention
    As Herbert Simon wrote in 1971, “a wealth of information creates a poverty of attention.” Today, time and attention are my scarcest resources, and many apps and media are designed to capture as much of them as possible.

  • Rationing in Crises
    When supplies are cut off, societies often ration. Britain introduced food rationing in 1940 and did not fully end it until 1954. In early 2020, panic buying emptied shelves of toilet paper and hand sanitizer, and many stores limited how much each customer could buy.

  • Scarcity Mindset in Personal Finance
    In a 2013 study in Science, Anandi Mani, Mullainathan, Shafir and Jiaying Zhao found that sugarcane farmers in India performed worse on cognitive tests before harvest, when money was tight, than after. In a related experiment, thinking about a large unexpected bill lowered poorer participants’ scores by an amount the authors compared to about 13 IQ points. Financial stress makes good decisions hardest exactly when they matter most.


Applying Scarcity

When I want to use this mental model, this is the simple process I follow:

  1. Identify What is Truly Scarce
    Ask which resource is the real constraint: money, time, energy, attention or something else.

  2. Make the Trade-offs Explicit
    For each choice, ask what I am giving up, not just what I am getting.

  3. Protect My Most Valuable Resources
    Guard my time and attention as carefully as my money, and spend them on what matters most.

  4. Build Slack
    Keep buffers of savings, time and energy, so that a temporary shortage doesn’t push me into tunnel vision.

  5. Question Manufactured Scarcity
    When someone tells me something is “almost sold out” or “only available today”, I pause and ask whether I would want it if it were plentiful.

  6. Look for ways to expand the pie
    Ask whether innovation, trade, cooperation or a different approach could make the resource less scarce.


Pitfalls and Limitations

  • Scarcity tactics can be used against me. Countdown timers, “only 2 left” messages and exclusive offers are designed to make me act fast and think less.

  • Scarcity creates tunnel vision. When I am short on time or money, I may solve today’s problem in ways that create bigger problems tomorrow, like taking expensive loans or skipping important but non-urgent work.

  • Fear of scarcity leads to hoarding. When everyone stocks up at once, as during panic buying, the fear itself creates the shortage.

  • Scarcity can lead to zero-sum thinking. Treating every situation as a fixed pie makes me miss the many cases where cooperation, trade and innovation can create more for everyone.


Related Mental Models


Scarcity reminds me that every choice has a cost, and that the most precious things I have, time, attention and health, are also the most limited. By being clear about what is truly scarce, keeping some slack, and seeing through manufactured scarcity, I make calmer and wiser decisions about where to spend what I have.



To learn more about economics and how key parts of our world work,
check out: Wise: How to Attain a Deep Understanding of the World, History, Our Place in It, and How to Live Well



📚 Sources and References


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